Chapter 7 Bankruptcy

Chapter 7 bankruptcy is often called liquidation bankruptcy
because you wipe out all (or most) of your debts and in return the bankruptcy
trustee liquidates your property to pay your creditors. However, because the
trustee cannot take exempt property (property that state or federal bankruptcy
law decrees as protected), most Chapter 7 bankruptcy filers keep all or most of
their property.

In 2005 Congress changed bankruptcy law so that not everyone
qualifies for Chapter 7 bankruptcy. If you earn more than the median income in
your state, you’ll have to take something called the “means test” to see if you
are eligible for Chapter 7.

Even if you do qualify, Chapter 7 isn’t the best option for
everyone. If you have lots of equity in your home, the trustee may sell it. And
if you are behind in mortgage payments or your car loan note, Chapter 7
bankruptcy is not usually the best way to save your home or car.

Chapter 7 bankruptcy is sometimes called “liquidation” bankruptcy—it cancels most types of debt, but you have to let the bankruptcy trustee liquidate (sell) your nonexempt property for the benefit of your creditors. Most people who use Chapter 7 get to keep all their property, but some states are more generous than others in this regard.

The majority of people who file for Chapter 7 bankruptcy have what is often referred to as no-asset Chapter 7 bankruptcy cases. In a no-asset Chapter 7 case, you don't have any property that the bankruptcy trustee can take and sell in order to repay your creditors. Yours can be a no-asset Chapter 7 even

If you file for Chapter 7 bankruptcy, can you keep a credit card so you can use it afterward? While it generally is not a good idea to keep a credit card in Chapter 7 bankruptcy, in most cases you can do it.

If you file for Chapter 7 bankruptcy and receive child support, you may be concerned about losing ongoing child support payments, payments you received before you filed for Chapter 7 bankruptcy, or child support arrears.

If you are considering bankruptcy, usually the two main options are Chapter 7 and Chapter 13 bankruptcy. There are pros and cons to each type, but in some situations Chapter 7 is the better choice. And in others, Chapter 7 is the only choice.